Notes to the consolidated financial statements (IFRS)

21. STOCK OPTIONS AND SHARE INCENTIVES
           
Tieto 2009 Stock Options
           
2009 A Stock Options
Initial number of Stock Options       600 000
Number of stock options outstanding on 31 December 2013 148 895
Number of stock options held by Tieto Corporation on 31 December 2013 45 700
Number of stock options granted during the year   0
Number of stock options forfeited during the year   0
Number of stock options annulled during the year   0
Number of stock options exercised during the year   139 395
Number of stock options expired during the year   55 200
Number of stock options converted during the year   0
Total number of stock options outstanding on 31 December 2014 0
Number of stock options held by Tieto Corporation on 31 December 2014 0
Total number of stock options exercisable on 31 December 2014 0
       
Share subscription period 1 March 2012–31 March 2014  
Share subscription terms 1 share in exchange for 1 stock option. The share subscription price is EUR 8.46.1) The amount of the dividend or funds distributed through a distribution of funds from the distributable equity fund decided after the beginning of the share subscription price determination period but before the share subscription will be deducted from the share subscription price of stock options as per the relevant record date. At the expiration the share subscription price was EUR 4.78.
           
           
2009 B Stock Options
Initial number of Stock Options   600 000
Number of stock options outstanding on 31 December 2013 481 750
Number of stock options held by Tieto Corporation on 31 December 2013 117 250
Number of stock options granted during the year   0
Number of stock options forfeited during the year   0
Number of stock options annulled during the year   0
Number of stock options exercised during the year   218 884
Number of stock options expired during the year   0
Number of stock options converted during the year   0
Total number of stock options outstanding on 31 December 2014 262 866
Number of stock options held by Tieto Corporation on 31 December 2014 117 250
Total number of stock options exercisable on 31 December 2014 262 866
       
Share subscription period 1 March 2013–31 March 2015  
Share subscription terms 1 share in exchange for 1 stock option. The share subscription price is EUR 16.87.1) The amount of the dividend or funds distributed through a distribution of funds from the distributable equity fund decided after the beginning of the share subscription price determination period but before the share subscription will be deducted from the share subscription price of stock options as per the relevant record date. At the end of year 2014 the share subscription price was EUR 13.19.
           
 
2009 C Stock Options
Initial number of Stock Options   600 000
Number of stock options outstanding on 31 December 2013 487 200
Number of stock options held by Tieto Corporation on 31 December 2013 112 800
Number of stock options granted during the year   0
Number of stock options forfeited during the year   11 000
Number of stock options annulled during the year   0
Number of stock options exercised during the year   211 221
Number of stock options expired during the year   0
Number of stock options converted during the year   0
Total number of stock options outstanding on 31 December 2014 264 979
Number of stock options held by Tieto Corporation on 31 December 2014 123 800
Total number of stock options exercisable on 31 December 2014 209 979
     
Share subscription period 1 March 2014–31 March 2016  
Share subscription terms 1 share in exchange for 1 stock option. The share subscription price is EUR 12.91.1) The amount of the dividend or funds distributed through a distribution of funds from the distributable equity fund decided after the beginning of the share subscription price determination period but before the share subscription will be deducted from the share subscription price of stock options as per the relevant record date. At the end of year 2014 the share subscription price was EUR 10.43.
           
           
Information related to stock options 2014
      Number of shares Weighted average exercise price
Shares under option at 31 December 2013 1 117 845 11.77
Granted       0 0
Exercised 1)       569 500 10.12
Forfeited       11 000 11.33
Expired       9 500 4.78
Shares under option at 31 December 2014 527 845 11.80
           
Based on the outstanding options 31 December 2014, the total number of shares may increase, at the maximum, as follows:
           
Stock option series Maximum of new shares based on outstanding options 1) Subscription period Exercise price, EUR
Stock option 2009 B 262 866 01.03.2013–31.03.2015 13.19
Stock option 2009 C 264 979 01.03.2014–31.03.2016 10.43
Total 527 845      
 
           
Tieto Corporation holds 117 250 options under the 2009 B stock options scheme and 123 800 options under the 2009 C stock options scheme. The Board of Directors shall decide on the allocation of these options to key employees of the Group at a later date. If all option rights in the company's possession are also taken into account, the number of shares could increase by a maximum of 768 895. In all the current option schemes, the persons covered by the scheme shall keep the options allocatecd to them if they are employed by Tieto on the starting date of the subscription period and if the performance criteria, if any, applicable to each allocation is achieved. Under the terms of the 2009 option scheme, the subscription price will be reduced annually by the amount of dividend per share.
           
The share subscription period of 2009 A stock options started on 1 March 2012 and ended on 31 March 2014, of 2009 B stock options the share subscription period started on 1 March 2013 and of 2009 C stock options on 1 March 2014. A total of 569 500 shares were subscribed for with stock options during 2014.
           
The options outstanding by range of exercise prices at 31 December 2014
           
  Options outstanding Vested options outstanding
Exercise price EUR Number of shares Weighted average remaining contractual
life in years
Weighted average
exercise
price EUR
Number
of shares
Weighted average exercise
price EUR
10.43 - 13.19 527 845 0.8 11.80 472 845 11.95
           
Assumptions made in determining the fair value of the Stock Options
           
The fair grant value of the stock options has been determined using the Black & Scholes method.
No options were granted during 2014.
           
 
Tieto Phantom Options 2014
           
In the autumn 2009 the Board of Directors decided to implement a synthetic option program (Tieto Corporation Phantom Options 2009). Phantom Options 2009 are allocated to key employees of the Tieto Group based on performance in those countries where stock options may not be granted. The maximum number of Phantom Options 2009 is 200 000 and they will be granted under series 2009 A, 2009 B and 2009 C. Phantom Options 2009 entitle their holders to a cash reward based on the total share return of the underlying shares during 2009–2012 (2009 A), years 2010–2013 (2009 B) and years 2011–2014 (2009 C). However, the reward payable on the basis of the Phantom Options, if any, may not exceed a Phantom Option holder's annual salary. Phantom options 2009 C were exercised during 2014 and the exercise price was EUR 6.62.
           
2009 C Phantom options
           
Initial number of Phantom Options 1)   22 500
Number of Phantom Options outstanding on 31 December 2013 10 600
Number of Phantom Options held by Tieto Corporation on 31 December 2013 11 900
Number of Phantom Options granted during the year   0
Number of Phantom Options forfeited during the year   0
Number of Phantom Options annulled during the year   0
Number of Phantom Options exercised during the year   10 600
Number of Phantom Options expired during the year   11 900
Number of Phantom Options converted during the year   0
Total number of Phantom Options outstanding on 31 December 2014 0
Number of Phantom Options held by Tieto Corporation on 31 December 2014 0
Total number of Phantom Options exercisable on 31 December 2014 0
     
Exercise date 1 March 2014  
Exercise of the Phantom Options Phantom Options 2009 C were exercised automatically on the exercise date 1 March 2014 2)
  Phantom Options entitle their holder to a cash reward provided that the volume-weighted average price of the Tieto share in continuous trading on NASDAQ Helsinki exceeds the base price on the exercise date.
  The base price of Phantom Options 2009 C is EUR 12.91.3) From the base price of the Phantom Options shall, before the exercise date, be deducted the amount of the dividend or funds distributed through a distribution of funds from the distributable equity fund decided after the beginning of the period for determination of the base price but before the exercise date.
  At the exercise the base price was EUR 11.33 and Tieto share price EUR 17.95.
           
           
           
           
           
Share-based incentive plans      
           
Long-term Incentive Programme 2012–2014      
On 15 December 2011 the Board of Directors decided to establish a new share-based incentive plan, The Long-Term Incentive Programme 2012–2014. The Programme contains three annual performance periods based on EPS (Earnings per Share) measurement and one parallel three-year period based on relative TSR (Total Shareholder Return) measurement. The first performance period begun on 1 January 2012 and the final performance period ended on 31 December 2014.

The estimated maximum number of shares to be delivered to participants as a reward is 1.6 million gross shares. The share rewards delivered under the programme will entitle to dividends or the value thereof beginning from the dividend payout in 2013. The share rewards are to be acquired from the market and hence, the incentive programme will have no dilutive effect. Individual performance periods are followed by a lock-up period of two years for the executive management or one year for the other participants. The possible reward will be paid in the form of Tieto shares and a cash payment to cover taxes.

From the first EPS Performance Period based on criteria attainment 13 398 Tieto Corporation shares were delivered to the Leadership Team members in May 2013. In addition, a cash payment was made to cover taxes and tax related costs. The delivered shares are under transfer restriction until publication of the financial results from year 2014. In December 2013, 1 492 shares were returned to the Company according to the terms and conditions of the Programme. For other Participants, on 14 March 2014 a total of 30 975 Tieto Corporation shares were delivered as a reward from Performance Period 2012. In addition, a cash payment was made to cover taxes and tax related costs.

From the second EPS period no rewards were paid since the target performance criteria were not achieved.

For the third and final EPS period the possible amount of the reward will be determined on the basis of the achievement of the EPS target after the financial statements for the financial year 2014. For the TSR Period the possible reward will be determined in February 2015 according to December-January share prices. The possible rewards from Performance Period 2014 and TSR Period will be paid in the executive management programme in spring 2015 and in spring 2016 for other participants.
           
Share-based reward plan
On 24 April 2014 the Board of Directors decided to establish a new share-based reward plan. The Plan consist of a one earning period and it will run until the end of 2016. The rewards to be paid correspond to the value of 62 500 Tieto shares in the maximum.

The Board of Directors anticipates that shares to be delivered to the participants under the plan would consist of shares in the possession of the company or shares to be acquired from the market. Thus, no new shares will be issued in connection with the plan and, therefore, the incentive plan will have no dilutive effect. The possible reward will be paid in the beginning of 2017 in the form of Tieto shares and a cash payment to cover taxes.
 
 
Stock Options, Phantom Options and Share-based Incentives effect on the result and financial position
           
EUR million         2014
Expenses for the financial year, share-based payments, equity settled 0.8
Expenses for the financial year, share-based, cash settled 1.7
Total expenses for the financial year, share-based payments 2.5
           
Liabilities arising from share-based payments 31 December 2014 2.2